Upscale retailers may pocket savings from end to quotas
By Andria Cheng; Dec. 12, 2004; Bloomberg News

  The Polo Ralph Lauren store on Madison Avenue and 72nd Street in New York sells $160 women's cashmere knit hats, $598 quilted coats and $397.50 cashmere sweaters. All are made in China.
  Those prices may stay at that level even after trade limits on textiles expire Jan. 1, flooding the U.S. with Chinese-made clothing and cutting costs for U.S. retailers by as much as 20 percent.
Upscale merchants such as Polo Ralph Lauren will keep the difference, says Roger Farah, president and chief operating officer of the New York-based clothier.
  "The retailers that are really delivering don't have to pass on the savings," says Michele Van Dyke, an analyst at Raleigh, N.C.-based BB&T Asset Management.
The 148-member World Trade Organization is scrapping trade limits on textile exports in part to try to help the economies of developing nations.
  The other beneficiaries may be Polo Ralph Lauren, Seattle-based Nordstrom and Bebe Stores, which will use savings of 15 to 20 percent to boost profits, stocks and product research, says Eric Beder, an analyst at JB Hanauer in New York.
  Fashion chains such as Bebe will give back less than 25 percent of savings to customers, while specialty and department-store chains such as Plano, Texas-based J.C. Penney may pass along 50 percent, Beder estimates. Discounters such as Bentonville, Ark.-based Wal-Mart Stores may distribute more than 75 percent.
  At Nordstrom, spokeswoman Deniz Anders says the elimination of quotas won't lead to any material change.
  The stocks and profits of specialty retailers such as Warrendale, Pa.-based American Eagle Outfitters and Abercrombie & Fitch may rise after quotas are lifted, says Lawrence Creatura, who helps manage about $2.3 billion at Pittsford, N.Y.-based Clover Capital Management, which owns clothing-company shares.
   Abercrombie & Fitch plans to keep any savings from the lifting of quotas because the company avoids discounts or sales, even during this holiday season, spokesman Thomas Lennox says. American Eagle didn't respond to requests for comment.
  Gap, the San Francisco-based retailer whose namesake chain offers basic clothing such as jeans and khakis, may be at a disadvantage, Creatura says.
  "People who sell more commodity items will benefit less," says Creatura, whose company owned 377,227 American Eagle shares as of Sept. 30. "American Eagle is branded goods.   They should be able to hold price as import costs decline."
  Gap considers the elimination of import limits an "opportunity" and expects costs in time will fall as a result, spokeswoman Tricia Link says.